Over two days Betsey Stevenson had two posts on the nature of work – both of which I agree with, and both of which sound like they may contradict.
So wait a second, if someone in a high status job gets paid more for the same effort and same contribution then why are we talking about marginal revenue product? Shouldn’t they already be rewarded by status? Is this a product of power? Let’s have a think
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Today I am going to discuss the relationship between the gender pay gap and wage stickiness.
Wages are termed sticky when they don’t adjust to the optimal level driven by the changes in labour market conditions. The interaction between sticky wages and economic shocks helps to generate the business cycle, and also causes a lot of the most costly elements of an economic downturn – unemployment and losses in skills.
As I have discussed in a previous post, prices as well as wages can be sticky. However, the focus here is on the inability for wages to change from a predetermined path – specifically the downward rigidity of money wages.
A strong reason why wages can be very sticky is unionisation. Unions and employers both use size to generate a bargaining position to negotiate wages. As part of this strategic negotiation, unions (at least in the Anglo-Saxon sense) tend to promote relatively sticky wages – and demand persistent increases in wages even when the economic cycle turns south.
But what does this have to do with wage inequality?
Note: There are multiple models of unionisation and social assistance – Matty pointed out that the books “Varieties of Capitalism” and Chapter 13 of the Oxford handbook of the welfare state are a useful read for thinking about this. The response of unions in Germany during the GFC and COVID show that the relationship between unions and stickiness is complex – and the assumption they are related is based on the experience of Anglo-American economies in the 1960-1980s.
Read moreOver the past few weeks I’ve been working mostly from home as part of the COVID lockdown. However, now with the move back to Level One I’m heading back into the office on a more full-time basis.
In the first few days back, I have heard a lot of people from around the building talking about how they prefer different work arrangements – and I’ve heard a lot of people say that they felt more work was being done away from the office. And yet, teams appear to be making the choice to move back to the office. Why is this the case?
Although it may be the case that the teams stated and real preferences differ, I suspect there is something else at play – strategic complementarity. Once we understand this concept it can become clear why we can end up in a worse equilibrium with regards to our work arrangements even when given flexi-choice, and why explicitly promoting working from home could be a “win-win”.
Read moreAs Motu has noted, the gig economy is an emerging part of the labour market with the features of independent contracting. In the gig economy world, there is little to no cost of switching the job to another is involved. Examples of the gig economy activities include: Uber drivers, YouTube bloggers/ social influencers, independent consultants and etc.
So how can we think about the labour market in a world where work switches towards the gig economy?
Read moreAs part of my job as a researcher I like to read about different topics – I have done work on health economics, labor economics, and more recently firm recruiting with the use of reverse phone lookups to hire the best employees. One topic that comes up across all these fields is the idea of a monopsony buyer for different things.
Looking across this blog I’ve seen monopsony discussed in terms of the labour market and in terms of migration and monetary policy. However, I want to focus on concentration indices (as a proxy for monopsony) and wages.
I see that Bloomberg is stating that Economists are changing their minds about unions – moving from seeing them negatively to seeing them positively.
Unions are an interesting topic, but are also inseparable from a discussion about the relative welfare state and competition policy embedded in a nation. Nordic and German trade unions are quite different from the trade unions of the US, UK, and Australiasia – and any evaluation of an institution in this way requires a model that allows us to represent the institution relative to other institutions in the economy, the way individuals behaviour relates to that, and how the outcomes for individuals will vary.
So does anyone want to do some of that in the comments below? I will hopefully be writing up some things on these issues over time – but as a starting point for discussion I will put up this oversimplification. Unions help to correct issues of insufficient bargaining power for labour, but like any monopoly their existence leads to deadweight losses which hurt those outside of the unionised industry, and are unfair to capital owners in competitive markets. Evaluating whether more unionisation is good relies on comparing the costs and benefits given in this oversimplification.
Off we go …